The staff of Porter Manufacturing has estimated the following net after

-tax cash flows and probabilities for a new manufacturing process:

Line 0 gives the cost of the process, Lines 1 through 5 give operating cash flows, and Line 5* contains the estimated salvage values. Porters cost of capital for an average

-risk project is 10%.

Net After- Tax Cash Flows

Year P = 0.2 P = 0.6 P = 0.2

0 $100,000 $100,000 $100,000

1 20,000 30,000 40,000

2 20,000 30,000 40,000

3 20,000 30,000 40,000

4 20,000 30,

000 40,000

5 20,000 30,000 40,000

5* 0 20,000 30,000

Assume that the project has average risk. Find the projects expected NPV. (Hint: Use expected values for the net cash flow in each year